help with 8-7 please. explain the last answer if possible thank you sed on the a

Question

help with 8-7 please. explain the last answer if possible thank you

sed on the assumptions of service levels at 40,900 hours, 45.00 37s nexible budg ctual sales xed manu- ing a decision to increase sales volume by lowering sales price 45 000 hur and 80,000 hours aet had budgeted its training service char Educaned to pro hour, the company was able to increase the actual number of hour 30,000 hours of training services during 2015. By lowering the 83.BA ice charge to $95 service cha o 31,500 on and ible for termine the sales volume va able (U) Determine the flexible able (U) ble budget variance, and indicate whether it is favorable (F)or unfavor the price of training services increase revenue? Explain. Responsibility for variable manufacturing cost variance tes volume variance, and indicate whether it is favorable (F) or unfavor- e has Exercise 8-8A pibden Manufacturing LO 8-4 Company set its standard variable manufacturing cost at $48 per unit of nMaany planned to make and sell 4,000 units of product during 2015. More spe- The m bdget called for total variable manufacturing cost to be $19200. Actual he 2015 was 4,200 units, and actual variable manufacturing costs amounted to tion supervisor was asked to explain the variance between budgeted and 170 The supervisor responded that she was not respon- u visor ontrolled by the

Explanation / Answer

(a) Sales Volume Variance :- Budgeted Price * (Actual Hours - Budgeted Hours)

= $100 * (31,500 - 30,000)

= $ 1,50,000 (Favorable).

(b) Flexible Budget Variance :- Actual Hours * (Budgeted Price - Actual Price)

= 31,500 *($100 - $95)

=$7,500 (Unfavorable).

(c) No, the lowering of price does not resulted in the increase of the revenue, as you can see total budgeted revenue was $30,00,000 (Budgeted Hour * Rate per Hour i.e 30,000 Hours *$100 per hour), however, revenue generated was $29,92,500 (Actual Hours * Rate per Hour i.e. 31,500 hours*$95 per hour) only.

Net increase in actual revenue than budgeted can only be achieved at this rate i.e $95 per hour if actual hours exceeds 31,579 Hours (Budgeted Revenue / Actual Rate per Hour, i.e. $30,00,000/$95).   

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